10:1 Split Soon, 625% Payout, 7,982% Returns: FMCG Giant ITC To Declare Dividend In 11 Days; BUY For Rs 510 TP

Cigarette maker ITC will be in focus in the coming days as the largest FMCG is set to declare its Q4 results along with final dividend rewards. In the fourth quarter, the earnings of ITC are expected to be steady with single-digit growth year-on-year likely in cigarette and FMCG EBIT. Among key factors to look out for will be management commentary on the demerger of ITC Hotels, and the outlook of businesses like paper, agri, hotels and food tech.

Ahead of Q4 results, ITC share is recommended to buy for a short-term target of Rs 460 and a long-term target of Rs 510.

ITC Share Price:

On BSE, ITC's share price stood at Rs 433.20 apiece, up by 1.9% with a market cap of Rs 5,40,838.13 crore. The stock's 52-week high and low are at Rs 499.60 apiece and Rs 399.30 apiece respectively.

ITC shares are undervalued currently giving more room for buying. YTD, the stock is down by 7.3%, while in a year, the stock is only up by 3%.

Nonetheless, ITC is a long-term wealth creator and multi-bagger.In 5 years, the stock zoomed by 43.73%, while its all-time gain is a whopping 7,982.09%. ITC shares were at Rs 5.36 apiece on July 14, 1995.

ITC Upcoming Dividend, Q4:

In its regulatory filing, ITC said, "A Meeting of the Board of Directors of the Company has been convened for Thursday, 23rd May 2024, inter alia, to:

- consider and approve the Audited Standalone and Consolidated Financial Results of the Company along with the Segment-wise Revenue, Results, Assets and Liabilities for the Quarter and Twelve Months ended 31st March 2024, the Balance Sheet as of that date, the Statement of Cash Flows for the financial year ended on that date and the Notes thereto, and

- consider and recommend Final Dividend for the financial year ended 31st March 2024."

Earlier, in 2024 during February month, ITC turned ex-dividend earlier for an interim dividend of Rs 6.25 per share or 625% having a face value of Re 1 each for the financial year ending on 31st March 2024. As per Trendlyne data, since July 2001, ITC has delivered up to 28 dividends to its investors. In the last 12 months, ITC has paid up to Rs 15.75 per share dividend.

ITC Share Target Before Q4:

For ITC's Q4FY24, HDFC Securities has factored 3% YoY growth in cigarette revenue, with volume growth of 1% YoY (4% 5-year CAGR) Hotels/Agri/Paper to grow by 9/flat/-4%. While it modelled 7% YoY growth in FMCG.

Further, the brokerage expects cigarette EBIT to grow by 2% YoY and that of FMCG EBIT margin at 9.5% vs. 10.1% YoY. Lastly, HDFC Securities expects EBITDA to increase by 2% YoY.

HDFC Securities has a short-term target of Rs 460 on ITC with a recommendation to 'ADD' on the stock.

Meanwhile, Phillip Capital said ITC's cigarette volume growth to moderate in Q4FY24, as consumers cut down on discretionary spends along with GPI gaining market share. Further, FMCG business growth to moderate as pricing anniversaries and one-off benefits related to PLI wanes away. Also, the Paper business is to see a significant correction in overall pricing, and EBITDA margin to contract on a YoY basis due to an inferior sales mix.

Phillip Capital has recommended BUY on ITC for a target price of Rs 510 apiece.

ITC Demerger:

ITC's ordinary shareholders are scheduled to meet on June 6, 2024, to consider, and if thought fit, approve the proposed Scheme of Arrangement amongst ITC Limited and ITC Hotels Limited and their respective shareholders and creditors.

The split-up of the hotel business from ITC will be in the ratio of 10:1. Meaning, for every (Ten) Ordinary Share of the face and paid-up value of Re. 1 each held in ITC, 1 (One) equity share of the face and paid-up value of Re. 1 in ITC Hotels

Post the implementation of the Scheme, the shareholders of ITC will directly hold about 60% of ITC Hotels, proportionate to their shareholding in ITC. The balance stake of about 40% will be held by ITC.

Other Key Factors:

Stock Splits: So far in its history, ITC has split only once in the ratio of 1:10 and that was done in September 2005. ITC split its 1 equity share into ten equity shares. The face value was trimmed to Re 1 from Rs 10, hence, a stock split ratio of 1:10.

Bonus Shares: ITC has rewarded investors with three bonus issues. The first bonus issuance was in September 2005, for a 1-to-2 ratio. This meant that ITC awarded 1 new bonus share on the existing two equity shares. ITC further declared a 1:1 bonus issue in August 2010, and a 1:2 ratio in July 2016.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.